Jakarta `cabinet from hell' ponders IMF terms
Tuesday 17 March 1998
Jusuf Habibie, the new vice-president, told visiting Tokyo officials that his country could implement all but two provisions in a 50-point programme agreed with the International Monetary Fund (IMF) in exchange for a $43bn (pounds 26bn) bail-out.
President Suharto said last week that many of the IMF's conditions ran contrary to the country's constitution and therefore could not be implemented. Mr Habibie was yesterday reported as saying that 40 of the reforms could be implemented soon and eight others could be adopted after some revision. But he stated that monopolies on the spice trade and on agricultural products other than rice could not be scrapped.
But Mohamad "Bob" Hasan, the new trade and industry minister, and close business associate of the Suharto family, who holds the lucrative timber trade monopoly, said such monopolies sometimes served the public interest. The IMF sees market liberalisation as a key aspect of economic reform. "Some monopolies help the people," he said, without being more specific.
Speaking yesterday in Hong Kong, Adam Schwarz, an Indonesia expert at the US-based Council on Foreign Relations, said bluntly that "the Indonesian economy is not on the brink of collapse, it is already collapsing".
He cited the mounting pressures of inflation, now in the range of 200- 300 per cent, the virtual cessation of imports because of the lack of foreign banks prepared to accept Indonesian letters of credit and the breakdown of the internal distribution system.
Mr Schwarz said that the corporate sector was "functionally bankrupt" and would even be so if the local currency appreciated in value by 50 per cent. Moreover there was even worse news to come because corporate debt accounted for around 80 per cent of Indonesia's foreign debt. Most of this debt had been saved from default by short-term borrowings which will mature next month and in May, triggering yet another liquidity crunch and possible defaults.
While economic problems were multiplying Mr Schwarz sensed a "large gap between how the outside world and the Indonesian leadership perceives the crisis".
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